Friday, March 26, 2010

Defeat fascism!

Do a J today!

But seriously.  There's lots of debate out there about about Chinese revaluation.  Normally, this would be just so much financial arcana, but even with some semblance of "recovery" underway in the developed economies, it's impossible to relegate these questions to the back page -- a weak renminbi is a form of trade subsidy and it could eventually become the initial shot in a trade war, especially given 10% unemployment and what I would almost call the beginnings of "political instability" in the US. 

The solution to all this is actually really obvious.  The Chinese need to rebalance their economy as much as we need to rebalance ours.  We spend less money and make more stuff, and vice versa for them. Normally, markets would tend to rebalace this stuff on their own (though potentially through a depression), but there's no way the political parasites are going to let this happen without extracting useless work out of the disequilibrium.  Obama-Jibao get my vote for Maxwell's Demon.  

Just as the left wing in the US is fond of pointing out (yes, correctly, in lots of ways) that our own culture has some structural factors that encourage consumption and discourage savings, we should also point out that the Chinese have the opposite problem.  The Chinese government massively subsidizes manufacturing and particularly export manufacturing.  Partly this is for economic reasons that were reasonable -- we were willing to go into hock to buy all their cheap plastic shit; you can develop really really fast with an export model because you only have to worry about the production half of the economy, etc ...  -- but partly it's just politics.  It's simply much harder to control an economy and a society that has a more open demand side.  The Chinese weren't never dumb, and they always knew this.  Which is what makes the otherwise very good Steven Roach not below a bit of a puff piece. 

To have a real sustainable economy, you have to have a feedback loop of production and consumption, a circular flow of goods where, ultimately, workers are getting paid enough to buy the shit they make.  This is just Marxism 101 -- slaves don't buy anything.  But if you flip this over ...

(and brief aside here on how thoroughly disgusting I find supposedly progressive intellectuals drooling at the chance to be mini-dictators of their own.  Remember in the 70's when anybody with 2 cents of liberal credentials was a convicted Maoist?   Or in the 60's when the Soviet Union was held up as the model?  Will the deep left ever quit implicitly lionizing benevolent dictatorship and get on the freedom train?)
... if you flip this phrase over, you realize that if you want to keep people slaves, you shouldn't let them buy anything.

This is precisely what China is doing.  Their "economic miracle" is built on the back of a fascist control, and not accidentally, but quite deliberately.  You see them now, with that famous Asian obsession with saving face, unwilling to back down.  They know at this point that they've built a totally unsustainable model.  And what have they done?  They've doubled down on it.  Economically it doesn't make any sense.  It risks blowing a huge bubble and creating a massive crash a few years down the line.  But it doesn't matter.  They've made their political choice, and they are stickin' with it. 

Red is Dead.

Posted via email from The Capitalist Axiomatic

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